Efforts to Promote Smart Houses— Leveraging the spread of HEMS and ECHONET Lite —Takuya Tatsuishi

Deputy Director
Information Economy Division,
Commerce and Information Policy Bureau
Ministry of Economy, Trade and Industry

1. Introduction■ Figure 1: The smart community and smart house concepts

Since the Great East Japan
Earthquake of March 2011,
Japan has been beset withsevere shortfalls in electricity
production, and has had tostep up its measures relating
to energy conservation. Thesemeasures include promoting
smart communities, whereg re ater conven ience a ndefficiency is achieved by using
IT (information technology) tointegrate and optimize systems
such as energy supply andtransportation. In particular, it
is expected that Japan would be
able to contribute significantly
to the promotion of energy
savings in the household sector
if progress is made in the spreadof smart houses (an essential ingredient of smart communities).
A smart house is one that uses IT to control storage
energy-saving equipment in the home, centered on a HEMS
(Home Energy Management System), and implements energy
management by using electric power prudently and widely. The
use of IT for fine-grained control of electric power demand enables
the implementation of advanced energy management techniquescalled “peak cut” and “peak shift”.
The pros and cons of introducing HEMS and other energy
management systems are strongly dependent on scale of thecustomer base and their decision-making viewpoint. For example,
heavy users of electricity such as factories and large-scale buildings
can achieve large energy savings, and since they are able toconcentrate on investment efficiency as a corporate activity, they
are likely to go ahead and introduce these systems if they decide
they are profitable, even if it will take a relatively long time torecoup their investment. On the other hand, ordinary households
stand to benefit less from energy-saving measures because they
use less electricity per building. Also, people tend to concentrate
more on non-economic factors such as convenience and lifestylefulfillment than on investment efficiency, so they are less likely to
install energy management systems.
But although the energy consumption per building may besmall, there are approximately 50 million ordinary households inJapan, and together they account for a substantial proportion of
the nation's total energy demand. It is therefore becoming essential
to promote the spread of smart houses by enticing consumers withnew services backed by appropriate policies.
■ Figure 2: Characteristics of the energy management
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2. Specific initiatives
As mentioned in the previous section, the key to promoting
the spread of smart houses lies in creating new services that are
not confined to energy management. Therefore, the government
should promote the following three measures: (1) standardizationof communication specifications, (2) cultivation of businesspractitioners (aggregators), and (3) preparation of an environment
for the creation of new services.
(1) Standardization of communication specifications
For efficient and effective energy management, it is important
to be able to communicate with and control smart meters anddomestic stored-energy equipment produced by any manufacturer.
For this reason, the government initiated a dialog with experts
and businesses in the private sector, and in February 2012 it
decided to recommend ECHONET Lite as the communicationinterface between HEMS and smart meters or domestic storedenergy equipment. ECHONET Lite is a Japanese communication
standard that is expected to become an international standard
during 2015. The government is also studying communication
media and drawing up specifications for achieving stronger
connectivity, especially for the eight types of equipment thatare envisaged to make a large contribution to domestic energy
management (smart meters, photovoltaic solar panels, storage
batteries, fuel cells, gas/oil water heaters, air conditioning, lighting
equipment and EV chargers).
As of February 2015, ECHONET Lite supports over 90types of equipment, and compatible products in all eight of the key
categories have already appeared on the market. The developmentof compatible products and investment in this market is expected
to increase in the future as environments are set up for purposessuch as establishing third-party verification schemes to ensure
connectivity.
(2) Cultivation of business practitioners (aggregators)
To promote the spread of energy management, it is essential
to cultivate players who can develop it as a business. In energy
management, it is generally the case that achievable energy savings
are lower for small-scale customers, making it harder for themto recover their investment. Aggregators who provide energy
management services through the collective management of small
consumers are therefore likely to play a key role in the promotionof energy management in the household sector.
During the fiscal years from 2011 to 2014, with a view to■ Figure 3: Standardization of communication specifications■ Figure 4: Market penetration of the eight key equipment categories

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New Breeze Spring 2015

■ Figure 5: Smart apartment concept

promoting the spread of energy management through aggregators,the government launched subsidized projects for aggregators tointroduce energy management systems in small buildings andapartment blocks. In this way, in addition to making progresswith cost reductions through the creation of initial demand, theaggregators can increase their involvement not just with electricity
providers but also with communication providers, equipment
manufacturers, and other businesses that have no involvementwith the conventional energy supply industry.
(3) Preparation of an environment for the creation of newservices
Despite the steady progress being made in the standardizationof communication specifications and the cultivation of aggregators,
small-scale consumers in the household sector attach importancenot only to economic rationality but also to viewpoints such as
convenience and lifestyle, as noted earlier. To meet this demand,
it will be necessary not only to further enhance the energy
management services, but also to create attractive services thatuse electricity data obtained from HEMS, so as to attract more
■ Figure 6: Image of new services

consumers and improve the prospects of this business.
On the other hand, there are two problems that stand inthe way of creating new services based on electricity usage
data obtained from HEMS. One is the standardization of
an information infrastructure for the efficient acquisition ofelectricity usage data by a broad range of services including
SMEs and venture businesses. The second is the development
of data handling rules that strike the right balance between datautilization and the protection of personal information.
To resolve these issues and prepare an environment where newservices can be created, the government began preparing a largescale HEMS information infrastructure in 2014. This project
involved introducing HEMS into 14,000 homes, building a largescale HEMS information infrastructure system to perform cloud
management, standardizing this system, and performing a study ofprivacy measures based on the opinions of actual consumers. The
plan is to complete this project by the end of the 2015 business yearwith restrained deregulation of the retail electricity market.

3. Conclusion
There are various issues to overcome in promoting thespread of smart houses. These include expanding the market for
HEMS and ECHONET Lite products, growing the numberof aggregators, creating attractive services, and providing anenvironment for these services. However, advances in the spreadof smart houses will reap large benefits for Japan, including thecreation of new industries for the utilization of data, and expansionof the market for compatible consumer electrical products.
Against this background, it is possible that deregulation of theretail electricity market scheduled to start from the 2016 businessyear may provide an opportunity for smart houses to spread.
Specifically, it is thought that a wide variety of operators will enter
the marketplace as competitive funding for attractive services
using power usage data obtained from HEMS. The government
is moving forward with short-term intensive environmental
improvements, but the ingenuity of private-sector providers willbe essential if smart houses are to spread. In the future, it is hopedthat the synergistic effects of both efforts will provide a large boost
to the spread of smart houses.

New Breeze Spring 20153